Pensioners will find their wallets $17.10 per fortnight heavier from today, Australians on Newstart or Austudy will scarcely notice any difference.

The disparity in the latest round of half-yearly increases - $17.10 per fortnight for single pensioners and just $2.90 per fortnight for Australians on allowances - is one of the widest on record.

It has come about because pensions are increased every six months in line with average male earnings while Newstart and other benefits are increased only in line with the consumer price index, which in recent months has been looking sick.

The CPI climbed not at all in the December quarter, by just 0.1 per cent in the March quarter and by 0.5 per cent in the June quarter. When Reserve Bank governor Glenn Stevens told parliament in August inflation was its lowest “for some years,” he meant it as good news. But for Australians who rely on the CPI to keep pace with other Australians the good news is anything but good.

Especially so because their own cost of living is climbing faster than the index...
While the consumer price index climbed 0.5 per cent in the three months to June, the living costs of Australians on government benefits climbed 0.6 per cent, according to a separately-compiled Bureau of Statistics survey. Rents, which are particularly important in the budgets of Australians on allowances, have been climbing strongly.

The ABS figures show the living costs of Australians on allowances have been increasing faster than the living costs of Australians on the pension, yet the latest increases will add $1.22 per day to the single pension and just 20 cents per day to the Newstart.

“The gap between pensions and allowances has been growing for over thirty years, it has led to a situation where Newstart is now so low that it creates its own barriers to finding work,” said Greens Senator Rachel Siewert who earlier this year attempted to live for a week on $17.15 per day, her calculation of Newstart after rent.

From today Newstart and student allowances will climb to $35.18 per day while the pension climbs to $55.20 per day.

Roughly equal during the 1980s, the two payments have drifted apart as the different indexation methods have widened the gap each six months. The Rudd government’s 2009 decision to lift the pension by $32 a week while Newstart unchanged widened the gap further.

The Senate is inquiring into the gap and is due to report in November.